Financing Your Clients Divorce?

As a CDFA™ who actively works with women going through the divorce process, my team and I often experience an imbalance of financial power when our clients are married to business owners or professionals. It is very common for the husband in these cases to control the family financial assets. This is usually an attempt to block the wife’s access to funds for her living expenses or to hire a team to help her obtain her fair share of the marital estate.

We have three general strategies that we use when we are retained as the Certified Divorce Financial Analyst™:

First, we ascertain what assets are available for the wife to use for her expenses. Does she have jewelry that can be sold(after consulting her counsel) or used as collateral for a loan? Are there bank accounts or retirement accounts that she can access? Does she have a 401k plan that will permit her to take a tax free plan loan?

The second piece of advice we give to the wife is to obtain a copy of her credit report and apply for credit before the case has been resolved. Applying for credit before the case is settled is often advantageous because she can legitimately use the household income on her credit application. Our goal is to obtain enough free credit on credit cards to provide living expenses for several months and create a line of credit that can be used to pay professionals. While this is usually high interest debt, the goal is to only use this credit as a last resort and pay it off as soon as practically possible when the case is resolved.

The last source of funds when our clients have been frozen out of the marital assets is for them to borrow the funds directly from a friend, family member or third party. If our client is amenable, and they have a friend or family member who can make a loan, this is usually the best financial option as the interest charged is generally very low when compared to other sources. Another option is to use a finance company that specializes in loaning funds to women going through divorce, so long as the attorney is not part of the agreement. We have experience working with these firms and in a high net worth case, they can be an invaluable resource for our clients.

We firmly believe that the party with less funds in a hotly contested case is at a significant disadvantage. Part of our role, as we look forward to our clients’ future, is to ensure that they get the best possible settlement–in this regard, the old adage that “it takes money to make money” truly applies.